2 Fabs Get the Final Approval in India

The long-awaited decision to set up semiconductor manufacturing facilities in India has been announced.

BANGALORE — It has finally happened. The long-awaited decision to set up semiconductor manufacturing facilities in India has been announced by the Minister for Communication and Information Technology, Kapil Sibal, on Friday, September 13. Sibal told EE Times:

Two consortia have proposed to build semiconductor wafer fabrication units in India. One of the consortia comprises International Business Machines, India's Jaiprakash Associates and Israel's Tower Jazz. The second comprises Hindustan Semiconductor Manufacturing Company (HSMC), STMicroelectronics and Silterra.

The investment in the first fabrication unit will be $4 billion while the second unit will have a total investment of around $3.9 billion, according to a Reuters report.

The whole point of setting these two fabs is to reduce imports (currently about 80 percent of the domestic requirement is met through imports). The move is seen as part of a plan to reduce dollar outflow at a time when the economy is battling a record current account deficit, which has also impacted the rupee.

Although there are many skeptics who feel that the fabs would go the way the earlier ones did, the government officials are quite positive about this development.

M.J. Zarabi, who headed the Empowered Committee responsible for the feasibility study for the setting up of a fab, told EE Times:

This is a decision that we have been keenly looking forward to. It is indeed a momentous decision that is expected to be a game changer as far as Indian electronics industry is concerned. I am sure all the electronics professionals are tremendously enthused by this decision.

Also for Ajay Kumar, the soft-spoken joint secretary of the Department of Electronics and Information Technology, who has always been championing the cause of a fab in India at almost every forum he speaks at, this is a culmination point for his espousal. He had always believed that if India had its own fab, then it would be easier to make a mark on the global hardware map.

He has been spearheading the "preferential market access" policy which states that whoever comes in to set up a fab would gain access to a large Indian/government market. Say, for instance, supplying chips for the Aadhaar card, a unique identification project set up by the Indian government to provide a 12-digit unique number to over 1 billion residents in India. Other areas of market access are in the changing of manual electricity/energy meters to smart cards, voting IDs for all the citizens, and driving licenses, all of which run into hundreds of millions cards.

At present, electronics imports are growing so fast that by 2020, they are projected to eclipse the oil import bill. India's semiconductor imports were $8.2 billion in 2012, according to Gartner. The demand is growing at around 20 percent a year, according to the Department of Electronics and Information Technology.

And, against this background, the setting up of a fab seems the only logical way out, though some would still argue that there is a lot more to the hardware story than just a fab or two. Getting India's infrastructure -- power, water, and roadways -- in good shape is more crucial than setting up manufacturing plant.

A design firm CEO who preferred to be anonymous told us:

If the government is not able to pull its act together and get the infrastructure moving in the right direction, there is no point in having the best of the chip manufacturing facilities here. How are we going to transport them with roads and logistics being a nightmare that they are today? Look at Bangalore or Mumbai today. When there are rains, the roads are a worse mess. Do you think you can transport chips on this crater-filled and potholed surface? Sure, you can but at what cost? Transport costs are going to shoot up -- as well as power costs and all this has to be kept at a competitive level as well.

Well. The die has been cast, so let's wait for a couple of decades for the real effect to come through. That's how long it has been for countries like China and Taiwan to be successful.

Call me Cynical... I do not believe this will ever happen... What somebody should do is checkout where the JAYPEE group has land that is yet under-developed... Then you can make a bet that they would announce the fab around there... JAYPEE along with the politicians will unload their lands etc at astronomical prices , make the money and run... Checkout Fab city in Hyderabad... If you take a look at who made money - it is the politicians and the few cronies... Who holds all the land near the fab city now - mostly NRI's ( Non resident indians or No return on Investment). The JAYPEE group has one of the highest debt to equity ratios among India Inc..and they have been trying to unload all their cement factorues etc to pay down the debt. What makes somebody think that they would carry thru on a fab plant, that will run into about 200-300 million loses the first few years before ever turning a profit......pipe dream....My 2 cents.....

@GSMD, thanks for sharing this history. You offer fasicnating perspectives on the industrial development in Inida -- with so many twists and turns, then, unintended consequences. We shall see how two fabs in India will change India's electronics landscape.

I think that the independent development of hardware ( and Software incl. OS & Appl. that went with it ) put India in a position to specialize and boom in Software after the home grown hardware part became unviable. Contrary to the expectations of uninformed "experts", no simple-minded linearity there !

ST would of course like to find new markets for their products that have become less competitive even in Europe. They have APs for Mobiles and other leading node SoCs, micro-controllers and then process for FD-SOI that could still turn out to be an alternative to FinFET.

But what does a pre-HKMG Foundry like Tower Jazz bring into the Party ( the 2 nd Fab ) ? To what extent would IBM keep supplying them with leading edge process technologies ( HKMG ) ? Would they ever do process R&D in India ?

On the other side of the Eq. the $ 8 billion per year of semiconductor import by India could be a bit of a red herring. One would suspect that much of that import bill is pre - decided by the OEM System importers ( Samsung ) and assemblers ( Nokia, local MicroMax - in bed w/ China's SpreadTurm ) in India.

But older nodes are quite adequate for new applications like ID and Smart Cards that are about to see volume application in India. So these Fabs could start even at 130 nm to keep yields high with a green crew.

Saw somewhere that both these CMOS Fabs are aiming for only 40k wafer starts per mo. To use up even that capacity India would need to develop balancing facilities ( Marketing, System Design, Assembly & Test,.. ) domestically. Otherwise these Fabs will have to turn into late node Foundries for export and we know how that goes. Won't do much to offset India's import bill for semis - the original purpose behind the generous Govt. subsidies.

Folks in India seem to be fixated on Digital Logic and are totally oblivious of Fabs for Power Electronics ( IGBTs ) & Compound semiconductors ( RF, LED, .. ) that are more relevant to an agrarian & rural economy ( not to mention that those Fabs are an order of magnitude cheaper ). Or to jump well ahead of the pack, they could focus on MEMS - especially for Medical sensors.

As usual the governement thinks it can just create magic by just starting something 20 years late and with crumbling infrastructure and high levels of beuracratic inefficiency this is surely a disaster in the making. Just goes to show how foolish the government can be when it's people are mostly illetrates.

I don't know on what basis this counts as the best way to boost economy by throwing billions in an untested and uncompetitive product called siclicon. I agree it would need one small unit just to show that it can but commercially viable, that's a pipe dream. When most companies are going fabless what makes the govt think the ones on Indian soil can churn out profits?

There are much better ways to utilize these billions to shore up the suffering manufacturing sector.

Making the infrastructure fab-friendly is a very big deal. That is why it is considered in fab locations. The cost of making the fab-friendly infrastructure "merely" needs to be deducted from the $4 billion. It could leave about $2-3 billion, which is just right for 65-90 nm maybe. So to get to the advanced nodes would need another round of funding.